South African SMEs poised for growth amid festive season and credit rating upgrades

As December ushers in the festive season, the landscape for small and medium enterprises (SMEs) in South Africa appears cautiously optimistic, thanks to positive developments in fiscal conditions and consumer spending.

Miguel da Silva, Group Executive of Business Banking at TymeBank, provides insights into the factors influencing this encouraging outlook for SMEs as they navigate the end of 2025.

The forthcoming review by Moody’s on South Africa’s credit rating, scheduled for 5 December, is a pivotal moment for the economy.

Currently rated Ba2, just shy of investment grade, Moody’s will consider the implications of recent credit upgrades performed by S&P Global Ratings, which marked a significant milestone for the country. In November, S&P upgraded South Africa’s foreign currency long-term sovereign rating from BB- to BB and lifted the local currency rating from BB to BB+.

This was the first upgrade from a major agency in over 16 years, showcasing growing confidence in South Africa's fiscal trajectory.

The positive fiscal indicators highlighted in Finance Minister Enoch Godongwana’s Medium-Term Budget Policy Statement, delivered on 12 November, have not gone unnoticed by credit rating agencies.

However, both Moody’s and S&P emphasize the necessity of showcasing increased investment—both foreign and domestic, as well as an uptick in GDP, to ensure sustained improvements in sovereign risk perception.

The festive season is further bolstered by a promising consumer spending forecast.

With a projected growth rate of 7% year-on-year fueled by a robust Black Friday performance, South African SMEs stand to gain significantly.

The trend of rising consumer spending, coupled with stable electricity, recuperating consumer confidence, and a surge in tourism, recording a staggering 26.9% year-on-year growth in international visitors, has cultivated a thriving environment for the retail, hospitality, and service sectors.

Additionally, a groundbreaking partnership between South Africa and the European Union, finalised on 20 November, heralds new opportunities for SMEs.

The Clean Trade and Investment Partnership, the EU's first global agreement of this nature, facilitates bilateral trade valued at €45 billion as of 2024.

By focusing on renewable energy, sustainable transport, and climate-mitigation technologies, this partnership opens avenues for SMEs within the green technology sector, promising access to investment and technical cooperation from EU initiatives.

Recent data released by Statistics South Africa reveals mixed economic indicators as the year comes to a close.

The country's GDP grew by 0.5% quarter-on-quarter in Q3 2025, slower than Q2’s revised growth of 0.9%, but outperformed expectations with a year-on-year rise of 2.1%.

Despite the dip in momentum, these figures suggest an underlying economic resilience, even as full-year growth remains projected at just 1.2%.

This subdued momentum may indicate constrained consumer demand and cautious business investments, reflections that SMEs should closely monitor.

As South Africa heads towards the end of the year, inflation figures continue to play a crucial role in shaping consumer behaviour. With the October 2025 inflation rate at a comfortable 3.6%, which sits well within the South African Reserve Bank’s revised targets, consumers may find their purchasing power enhanced during the festive season.

This supportive inflationary environment is critical for SMEs reliant on stable borrowing costs for working capital and asset financing.

As 2025 draws to a close, South African SMEs find themselves at a critical juncture. The convergence of enhanced trading conditions during the festive season, a promising credit rating outlook, and newly established international partnerships offers a glimpse of both immediate revenue prospects and sustainable growth. SMEs that adeptly navigate this peak retail period while maintaining vigil over key economic indicators can expect to carve out effective operational strategies as they enter 2026.

BUSINESS REPORT